Saving for retirement isn’t just a nice-to-do in Australia—it’s compulsory. Superannuation requires your employer to set a portion of your earnings aside each month to ensure you’re financially prepared later in life.
Understanding superannuation and how to manage your money more broadly can make a big difference to your long-term financial security. Whether you’re figuring out how much to save or send home, Remitly is here to help you navigate your finances with confidence.
What is superannuation?
Superannuation—usually just known as super—is Australia’s retirement planning system. It consists of long-term investment funds that employers contribute to on your behalf, helping you build a nest egg for when you stop working.
Super is there to ensure you have enough savings to support yourself in retirement. Unlike regular savings, superannuation is compulsory for most workers. You can also choose to make voluntary contributions.
Your employer manages contributions, and your super fund invests the money, growing it until you reach retirement.
Choosing the right super fund
When choosing a super fund, it’s important to find one that aligns with your financial goals and comfort with risk.
Some funds focus on higher returns and invest in growth assets like shares, which can be more volatile but result in greater profits over time. Others prioritise stability, investing in lower-risk options like bonds and cash, which offer steadier returns with less fluctuation.
The right fund for you depends on how much risk you’re willing to take and how hands-on you want to be with managing your super. The easiest way to compare funds and find the one that suits your needs is to use the Australian Tax Office’s (ATO) YourSuper comparison tool.
Types of super funds
There are a few different types of super funds in Australia. The fund you can open will depend on the industry you work in and your investment preferences:
- Industry funds: Managed to benefit members rather than generate profits. Some are geared towards people working in specific industries, while others are open to everyone.
- Retail funds: Offered by banks and financial institutions. These funds provide a wide range of investment options but often have higher fees than alternatives.
- Public sector funds: Designed for government employees. They often have lower fees and generous benefits, but you can only join them if you work for the state.
- Corporate funds: Set up by large employers for their staff. Some are managed in-house, while others are operated by retail fund providers.
- Self-managed super funds: SMSFs are a DIY option. You control your investments, which require significant time, effort, and financial knowledge.
Transferring your superannuation fund
Don’t worry about making the perfect choice of superannuation fund when you first move to Australia. Your choice isn’t set in stone; you can transfer your super to another fund at any time if you change your mind.
If you want to transfer your super to another fund, you’ll first want to compare the various funds available to you and consider the pros and cons. For example, some funds include insurance that you may lose after switching. There may also be exit fees for leaving your existing fund.
Once you have all the necessary information and are satisfied that the switch is right for you, you’ll need to initiate the transfer. Log in to your myGov account and use the ATO’s super rollover service, or request a transfer directly through your chosen fund.
Ways to make superannuation contributions
Your super fund will grow through a combination of employer contributions and personal contributions.
There are two main types of contributions to be aware of:
- Concessional contributions, which are made before tax.
- Non-concessional contributions, which are made after you’ve paid tax on your salary.
Under the Superannuation Guarantee (SG), your employer is required to contribute a percentage of your salary to your super fund—at least 11.5% of your annual income. This happens automatically with each paycheck.
You can also choose to make voluntary contributions, either through pre-tax “salary sacrificing” or by contributing post-tax funds yourself. These extra contributions can help grow your retirement savings faster. However, there are limits on how much you can contribute each year.
Growing your fund
There are some other ways you can beef up your superannuation fund.
First, if you haven’t used your full concessional contributions cap in the past five years and your super balance is under $500,000 AUD, you may be able to carry forward unused cap amounts and contribute more later on. This is known as the 5-year rule.
Then there’s the downsizer contribution scheme. This kicks in when you’re over the age of 55 and sell your primary home. In this instance, you’re allowed to contribute up to $300,000 AUD from the proceeds of the sale into your super.
Lower-wage earners also get some benefits. If you earn under $58,445 AUD and make a personal after-tax contribution, the ATO may contribute up to $500 AUD under the government co-contribution scheme.
Those who earn less than $37,000 AUD can take advantage of the Low-Income Super Tax Offset to balance the tax paid on concessional contributions. Plus, if your spouse earns less than $40,000 AUD, you can also contribute to their super and receive a tax offset of up to $540 AUD.
Finally, if you’re selling a small business, you may be able to contribute part of the proceeds into your super tax-free under the Capital Gains Tax (CGT) retirement exemption.
Contribution caps
Super contributions are subject to annual limits to prevent excessive tax advantages. Understanding these caps can help you plan your contributions to make the most of tax benefits and grow your super fund.
The limits differ based on whether the contributions are concessional or non-concessional.
| Income year | Concessional cap | Non-concessional cap |
| 2024–2025 | $30,000 AUD | $120,000 AUD |
| 2023–2024 | $27,500 AUD | $110,000 AUD |
| 2022–2023 | $27,500 AUD | $110,000 AUD |
| 2021–2022 | $27,500 AUD | $110,000 AUD |
| 2020–2021 | $25,000 AUD | $100,000 AUD |
There are also restrictions on voluntary contributions that depend on your total super balance. For example, if your super balance reaches $1.9 million AUD, you aren’t allowed to make non-concessional contributions.
It’s important to note that this cap only affects new contributions. It does not place a limit on how much you can hold in your super fund. Even if your balance exceeds the threshold, your existing savings will continue to grow through investment returns.
What happens if you exceed the contribution limits?
Exceeding your contribution caps can result in extra taxes and penalties, so it’s important to track how much you contribute each year.
If you go over the concessional cap, the excess amount will be added to your taxable income and taxed at your marginal tax rate. You will also be charged interest penalties, as the government considers this an early tax advantage. However, you have the option to withdraw the excess amount, along with associated earnings, to avoid further penalties.
The consequences are harsher if you exceed the non-concessional cap. Excess contributions are taxed at a hefty 47% unless you elect to withdraw them. If you withdraw the excess, the earnings on those contributions will still be taxed at your marginal tax rate.
Setting yourself up for retirement
Planning for retirement starts with setting clear savings goals. Your employer is obliged to send 11.5% of your salary to your superannuation fund, but you’re allowed to top this up if you want.
To figure out whether you should make voluntary contributions and how much they should be, there are a few things to consider:
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- How many working years you have left: Your age and expected retirement age will determine how long you have to grow your super.
- What you earn and how much you spend: Your monthly salary and living expenses will influence the size of the voluntary contribution you can make.
- What you want your life in retirement to look like: Do you plan to travel, downsize your home, or keep things as they are? Your goals will affect your savings target.
- How much things will cost in the future: Inflation trends change the relative value of the Australian dollar, so your future cost of living in Australia may be higher than it is today.
To help you plan, the Australian Securities and Investments Commission (ASIC) has developed a range of useful tools to estimate how much you’ll need and whether your super contributions are on track. Visit the ASIC’s Moneysmart website and play around with the Super and pension age calculator, Budget planner, and Retirement planner to get an idea of what you should be saving.
Accessing your super
Superannuation is designed to be a long-term investment that you only access when you retire. However, you may be able to withdraw your funds before retirement age in certain circumstances.
Viewing your superannuation fund balance
Keeping track of your super balance is essential for managing your retirement savings effectively. Regularly checking your balance helps ensure your employer is making the correct contributions and that you don’t exceed contribution caps, which could lead to tax penalties.
Most super funds have online portals and mobile apps where you can easily check your balance, track performance, and manage contributions.
You can also view your overall super balance by logging into your myGov account and linking it to the Australian Taxation Office. This lets you see all your super accounts in one place, including any you might have lost or forgotten about.
Withdrawing from your superannuation fund at retirement
Superannuation is a long-term investment, and you can generally withdraw funds only after you’ve retired permanently and reached preservation age. Your preservation age—the age when you can access your super—depends on when you were born.
| Date of birth | Age you can access your super |
| Before 1 July 1960 | 55 |
| 1 July 1960 to 30 June 1961 | 56 |
| 1 July 1961 to 30 June 1962 | 57 |
| 1 July 1962 to 30 June 1963 | 58 |
| 1 July 1963 to 30 June 1964 | 59 |
| After 1 July 1964 | 60 |
Once you reach preservation age, you can withdraw your super if you retire permanently. But should you keep working beyond your preservation age, you generally can’t access your full super until you’re 65.
When you withdraw funds, you can take out a lump sum, receive a regular income, or a combination of both.
It’s good to note that there are thresholds you are required to reach if you are receiving a regular income from your super. These increase as you age. For example, at preservation age to 64, the minimum withdrawal rate is 4% of your balance per year. This increases to 5% from age 65 to 74 and rises further as you age.
Super withdrawals are tax-free if you’re aged 60 or older and your super is maintained in a taxed fund.
Withdrawing from your super before retirement
You may be able to withdraw from your superannuation before reaching preservation age if you satisfy an early access requirement. There are strict conditions—and sometimes harsh tax implications—for doing this:
- Severe financial hardship: If you’ve been on government income support for at least 26 weeks, you may be eligible to withdraw a portion of your super. These withdrawals are generally not taxed.
- Compassionate grounds: If you need funds to cover urgent expenses, such as medical treatment or funeral costs, the ATO may approve an early withdrawal taxed at a maximum of 22%.
- Terminal illness or permanent incapacity: If you’re diagnosed with a terminal medical condition or become permanently disabled, you can make withdrawals without incurring tax.
- Buying your first home: The First Home Super Saver Scheme (FHSSS) allows you to withdraw up to $50,000 AUD of voluntary contributions, plus earnings, to put towards a deposit. This is subject to your marginal tax rate minus a 30% offset.
- Temporary residents leaving Australia: If you were on a temporary work visa and have since left Australia, you may be able to withdraw your Departing Australia Superannuation Payment (DASP). This is taxed at 35% for taxed funds, 45% for untaxed funds, and 65% for working holiday visa holders.
Save for your future
Superannuation might seem complex at first, but understanding how it works can help you take control of your financial future in Australia. From choosing the right fund to making contributions that fit your budget, these decisions can impact your long-term financial security.
As an immigrant, navigating a new financial system can be challenging, but planning ahead ensures you make the most of the opportunities available. Taking small steps today can set you up for a comfortable retirement down the line.
FAQ
How does superannuation work?
Superannuation, or super, is a retirement savings system in Australia. Employers are required to contribute a percentage of your earnings into a super fund, which invests the money on your behalf. These investments grow over time, providing you with income during retirement.
What is a good super balance to retire on?
The ideal super balance for retirement will vary based on your circumstances. The Association of Superannuation Funds of Australia (ASFA) suggested that singles needed around $545,000 AUD and couples approximately $640,000 AUD for a comfortable retirement in 2017. With inflation at around 3%, this would translate to around $690,000 AUD and $810,000 AUD, respectively, in 2025.
What is the 4% rule for superannuation?
The 4% rule is a retirement guideline that suggests you withdraw 4% of your superannuation savings in the first year of retirement, then adjust that amount annually for inflation. This approach aims to make your savings last for a 30-year retirement period.
What is the 5-year rule for superannuation?
The 5-year rule allows you to carry forward unused concessional pre-tax contribution caps for up to five years. To be eligible, your total super balance must be less than $500,000 AUD at the end of the previous financial year.